ZS40/TZ60 vs the competition

That’s interesting, thanks for doing that. I took the liberty of comparing those 10MP images side-by-side.

Base ISO viewed at 100%:

1600 ISO viewed at 100%:

There isn’t a lot of difference, as you said. The WB differs a little. and to my eyes the LX7 has a slight advantage but it isn’t by a huge amount. I would say that the ZS40 comes next and then the LF1, but again there isn’t much in it. Also, that’s at 100% viewing, and the differences would be even less at normal viewing sizes.

I think it demonstrates that IMHO, it’s not possible to say with certainty that “more MP always means worse IQ” for small sensor models. (By “small" there, I mean wrt DSLRs.) The greater number of pixels generally means an increased resolution (in absolute lines per mm) but that is offset by the smaller pixel size tending to increase noise (especially at higher ISO) and the effects of diffraction.

So, it seems to be something of a “balancing act”, which also includes very importantly the quality of the processing.